Understanding Finance

Understanding Finance
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Table of Contents
Part A...............................................................................................................................................3
1. Cash Budget for the 6-month..................................................................................................3
2. Advise to directors of Hamble Ltd for possible solution to cash flow problems....................3
3. Sources of finances.................................................................................................................4
4. Raising finance through issue of shares..................................................................................4
Part B...............................................................................................................................................5
1. Ratio calculation....................................................................................................................5
2. Comparing the performance of two companies......................................................................5
Part C...............................................................................................................................................6
1. Sales budget............................................................................................................................6
2. Factors contributing to change in demand..............................................................................6
References........................................................................................................................................8
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Part A
1. Cash Budget for the 6-month
2. Advise to directors of Hamble Ltd for possible solution to cash flow problems
Most evident cash flow problem for the business is up and down of the cash balance
which can be reflected in negative cash balances in the months of May and June. It may be either
due to that company has a fixed monthly cash outflow while it does not have fixed inflow
pattern. Therefore, whenever company sees an extra payment, it gets into deficit, even after
having a positive sales growth trend (Akan and Tevfik, 2020). In order to avoid these
turbulences, company should have provided for provisions and reserves such as for asset
replacement. Company should try to optimise its fixed cost or renegotiate payment terms with
creditors to align them with debtors i.e. pay at least two months post purchase.
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